nep-gth New Economics Papers
on Game Theory
Issue of 2016‒02‒12
eighteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Ultimatum Concession Bargaining: an Experimental Study By Chiara Felli; Werner Güth; Esther Mata-Pérez; Giovanni Ponti
  2. The prisoners' dilemma, congestion games and correlation By Forgó, Ferenc
  3. Bounded Rationality and Correlated Equilibria By Fabrizio Germano; Peio Zuazo-Garin
  4. Cognitive Hierarchies in the Minimizer Game By Ulrich Berger; Hannelore De Silva; Gerlinde Fellner-Röhling
  5. Other regarding preferences and reciprocity:insights from experimental findings and satisfaction data. By Leonardo Becchetti; Vittorio Pelligra; Serena F. Taurino
  6. Experience and Gender Effects in an Acquiring-a-Company Experiment Allowing for Value Messages By Daniela Di Cagno; Arianna Galliera; Werner Güth; Noemi Pace; Luca Panaccione
  7. The better toolbox: Experimental Methodology in Economics and Psychology By Daniela Di Cagno; Werner Güth; Giacomo Sillari
  8. « Can a Platform Make Profit with Consumers' Mobility? A Two-Sided Monopoly Model with Random Endogenous Side-Switching » By Pierre Andreoletti; Pierre Gazé; Maxime Menuet
  9. Learning to trust, learning to be trustworthy By Ulrich Berger
  10. Gender differences in Socially Responsible Consumption. An Experimental Investigation By L. Becchetti; V. Pelligra; F. Salustri; A. Vásquez
  11. Gossip and the efficiency of interactions By Dietmar Fehr; Matthias Sutter
  12. Strategic trade in pollution permits By Alex Dickson; Ian A. MacKenzie
  13. States as Game Players The Example of Russia, China and Europe By Gérard Mondello
  14. Note on the Common Enemy Effect under Strategic Network Formation and Disruption By Hans Haller; Britta Hoyer
  15. Comparison of Voting Procedures using Models of Electoral Competition with Endogenous Candidacy By Damien Bo; Arnaud Dellis; Mandar Oak
  16. A Hybrid Public Good Experiment Eliciting Multi-Dimensional Choice Data By Daniela Di Cagno; Arianna Galliera; Werner Güth; Luca Panaccione
  17. A new rule for the problem of sharing the revenue from museum passes By Gustavo Bergantiños; Juan D. Moreno-Ternero
  18. Very Simple Markov-Perfect Industry Dynamics By Abbring, Jaap H; Campbell, Jeffrey R; Tilly, Jan; Yang, Nan

  1. By: Chiara Felli; Werner Güth; Esther Mata-Pérez; Giovanni Ponti
    Abstract: Unlike letting the Ultimatum Game be played in the strategy mode with monotonic response strategy, both players, the proposer as well as the responder, are allowed to concede. Proposers would concede by increasing second, third, ... binding offers. Similarly, responders concede by decreasing binding acceptance thresholds. Treatments differ in whether to avoid early conflict at least one party must concede. The other condition varies the number of possible concessions, namely, two versus four. Since accepting every positive (last) offer is weakly undominated, the benchmark outcome is the usual one with the smallest positive offer accepted (at least in last attempt). If concessions are necessary, the responder might prefer larger early acceptance thresholds allowing him to concede. Similarly, a proposer might begin by offering much less than what she is finally willing to concede. Our experimental findings confirm the hypothesis of more frequent and larger concessions by responder participants for whom the concessions are hypothetical and essentially mean to rely on weakly dominant behavior. According to our data, the need of concessions weakens the power advantage of the proposer. Surprisingly, the longer horizon does not improve the chances of an agreement, even when no concessions are needed.
    Keywords: Bargaining Experiments, Concession Making
    JEL: C72 C78
  2. By: Forgó, Ferenc
    Abstract: Social dilemmas, in particular the prisoners' dilemma, are represented as congestion games, and within this framework soft correlated equilibria as introduced by Forgó F. (2010, A generalization of correlated equilibrium: A new protocol. Mathematical Social Sciences 60:186-190) is used to improve inferior Nash payoffs that are characteristic of social dilemmas. These games can be extended to several players in different ways preserving some important characteristics of the original 2-person game. In one of the most frequently studied models of the n-person prisoners' dilemma game we measure the performance of the soft correlated equilibrium by the mediation and enforcement values. For general prisoners' dilemma games the mediation value is ∞, the enforcement value is 2. This also holds for the class of separable prisoners’ dilemma games.
    Keywords: prisoners' dilemma, congestion games, soft correlated equilibrium, mediation value, enforcement value
    JEL: C72
    Date: 2016
  3. By: Fabrizio Germano (Universitat Pompeu Fabra and Barcelona Graduate School of Economics); Peio Zuazo-Garin (Universitat Rovira i Virgili, CREIP and BRiDGE)
    Abstract: We study an interactive framework that explicitly allows for nonrational behavior. We do not place any restrictions on how players’ behavior deviates from rationality. Instead we assume that there exists a probability p such that all players play rationally with at least probability p, and all players believe, with at least probability p, that their opponents play rationally. This, together with the assumption of a common prior, leads to what we call the set of p-rational outcomes, which we define and characterize for arbitrary probability p. We then show that this set varies continuously in p and converges to the set of correlated equilibria as p approaches 1, thus establishing robustness of the correlated equilibrium concept to relaxing rationality and common knowledge of rationality. The p-rational outcomes are easy to compute, also for games of incomplete information, and they can be applied to observed frequencies of play to derive a measure p that bounds from below the probability with which any given player chooses actions consistent with payoff maximization and common knowledge of payoff maximization.
    Keywords: strategic interaction,correlated equilibrium,robustness to bounded rationality,approximate knowledge,incomplete information,measure of rationality,experiments
    Date: 2015–11
  4. By: Ulrich Berger (Department of Economics, Vienna University of Economics and Business); Hannelore De Silva (Department Finance, Accounting and Statistics , Vienna University of Economics and Business); Gerlinde Fellner-Röhling (Institute of Economics, Ulm University)
    Abstract: Experimental tests of choice predictions in one-shot games show only little support for Nash equilibrium (NE). Poisson Cognitive Hierarchy (PCH) and level-k (LK) are behavioral models of the thinking-steps variety where subjects differ in the number of levels of iterated reasoning they perform. Camerer et al. (2004) claim that substituting the Poisson parameter tau = 1.5 yields a parameter-free PCH model (pfPCH) which predicts experimental data considerably better than NE. We design a new multi-person game, the Minimizer Game, as a testbed to compare initial choice predictions of NE, pfPCH and LK. Data obtained from two large-scale online experiments strongly reject NE and LK, but are well in line with the point prediction of pfPCH.
    Keywords: behavioral game theory, experimental games, Poisson cognitive hierarchy, level-k model, minimizer game
    JEL: C72 C90 D01 D83
    Date: 2016–01
  5. By: Leonardo Becchetti (CEIS, University of Rome Tor Vergata); Vittorio Pelligra (University of Cagliari, CRENoS); Serena F. Taurino (University of Rome Tor Vergata)
    Abstract: We measure satisfaction about experimental outcomes, personal and other participants' behaviour after a multiperiod "hybrid contribution" multiplayer prisoner's dilemma called the "vote with the wallet" game. Our work shows that participants who cooperated above median (which we define as strong cooperators) are significantly more satisfied with the game in proportion to their cooperative choice. On the contrary, their satisfaction for the other players' behavior is negatively correlated with the extent of their own cooperative behavior and the non-cooperative behavior of the latter. The satisfaction of strong cooperators for their behavior in the game depends in turn on the share of their own cooperative choices. We document that a broader utility function including heterogeneity in expectations on other players' behavior, other-regarding preferences, and a negative reciprocity argument may account for the combination of the observed experimental and satisfaction findings.
    Date: 2016–02–01
  6. By: Daniela Di Cagno; Arianna Galliera; Werner Güth; Noemi Pace; Luca Panaccione
    Abstract: This paper focuses on a bargaining experiment in which the privately informed seller of a company sends a value message to the uninformed potential buyer who then proposes a price for acquiring the company. Participants are constantly in the role of either seller or buyer and interact over 30 rounds with randomly changing partners in the other role. We test how overstating the value of the company, underpricing the received value message and acceptance of price offers are affected by experience and gender (constellation). Like in our companion paper on single play (Di Cagno et al. 2015) we control via treatments for awareness of gender (constellation). One main hypothesis is that gender (constellation) matters but that the effects become weaker with more experience and that the main experience effects apply across gender (constellations).
    Keywords: bargaining, cheap-talk, experience effect, experiment, gender, winner’s curse
    JEL: C78 C91
  7. By: Daniela Di Cagno; Werner Güth; Giacomo Sillari
    Abstract: In experimental economics one can confront a “don’t!â€, as in “do not deceive your participants!†as well as a “do!â€, as in “incentivize choice making!â€. Neither exist in experimental psychology. Furthermore, controversies exist in both fields regarding data collection methods, e.g. play, strategy (vector) method in strategic game experiments, and concerns for external and internal validity, e.g. field versus lab experiments. In addition to touching on these aspects, we suggest ways to enrich the dimensionality of choice data, if possible, when maintaining the revealed-motive approach. Finally, and most mportantly, we recommend to elicit not only choice data but also to collect supplementary data shedding light on how participants deliberate before deciding.
    Keywords: methodology, experiments, game theory
    JEL: B41 A12 C91 C70
  8. By: Pierre Andreoletti (MAPMO - Mathématiques - Analyse, Probabilités, Modélisation - Orléans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique); Pierre Gazé (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans); Maxime Menuet (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans)
    Abstract: We model a specific two-sided monopoly market in which agents can switch from a side to the other. We define two periods of time. In the first period, agents buy the platform services on each side and in the second period of time, they can possibly enhance their satisfaction by going to the other face of the platform. We analyze the link between mobility, consumer’s utility, prices and profit. We show that mobility is a valuable feature which can be compared with an increase of product quality. Finally, the firm is able to capture the mobility in its monopoly’s profit. The relative size of each group then appears as a strategical variable for the firm.
    Keywords: externalities, side-switching, two-sided markets
    Date: 2016–01–06
  9. By: Ulrich Berger (Department of Economics, Vienna University of Economics and Business)
    Abstract: Interpersonal trust is a one-sided social dilemma.Building on the binary trust game, we ask how trust and trustworthiness can evolve in a population where partners are matched randomly and agents sometimes act as trustors and sometimes as trustees. Trustors have the option to costly check a trustee's last action and to condition their behavior on the signal they receive. We show that the resulting population game admits two components of Nash equilibria. Nevertheless, the long-run outcome of an evolutionary social learning process modeled by the best response dynamics is unique. Even if unconditional distrust initially abounds, the trustors' checking option leads trustees to build a reputation for trustworthiness by honoring trust. This invites free-riders among the trustors who save the costs of checking and trust blindly, until it does no longer pay for trustees to behave in a trustworthy manner. This results in cyclical convergence to a mixed equilibrium with behavioral heterogeneity where suspicious checking and blind trusting coexist while unconditional distrust vanishes.
    Keywords: trust game, evolutionary game theory, reputation, best response dynamics
    JEL: C72 C90
    Date: 2016–01
  10. By: L. Becchetti; V. Pelligra; F. Salustri; A. Vásquez
    Abstract: We report on a simple experimental study designed to investigate the different gender attitudes towards socially responsible consumption. We use the Vote-with-the-Wallet Game (VWG), a version of a repeated multiplayer prisoner’s dilemma that mimics the characteristics of the choice between a conventional and a socially responsible product. More precisely we test the effect of three factors - two different frames and an ex-post redistribution mechanism that transfers resources from purely self-interested consumers to responsible ones. We find that women remain significantly more cooperative (choosing more often the responsible good) when the redistribution mechanism is interrupted and are significantly less satisfied about the behavior of the other players in that treatment.
    Keywords: Responsible Consumption, Gender Differences, social preferences, lab experiment
    JEL: C72 C92
    Date: 2016
  11. By: Dietmar Fehr; Matthias Sutter
    Abstract: Human communication in organizations often involves a large amount of gossiping about others. Here we study in an experiment whether gossip affects the efficiency of human interactions. We let subjects play a trust game. Third parties observe a trustee?s behavior and can gossip about it by sending a message to the trustor with whom the observed trustee will be paired (for the first time) in the next round. While messages are non-verifiable and sometimes also incorrect, the possibility of gossip is highly efficiency-increasing compared to a situation without any gossip. In two further control treatments, we show that the mere fact of being observed by third parties cannot explain the efficiency-increasing effect of gossip, and that noisy gossip (where information transmission from third parties to trustors can fail) still increases efficiency, but less so than if information transmission is undisturbed.
    Keywords: gossip, communication, trust game, efficiency
    JEL: C72 C92
    Date: 2016–02
  12. By: Alex Dickson (Department of Economics, University of Strathclyde); Ian A. MacKenzie (School of Economics, The University of Queensland)
    Abstract: Markets for pollution have become a popular regulatory instrument. Yet these markets are often highly concentrated, which may lead to strategic behavior by all participants. In this article we investigate the implications of strategic trade in pollution permits. The permit market is developed as a strategic market game, where all firms are allowed to behave strategically and their roles as buyers or sellers of permits are determined endogenously with price-mediated trade. In a second stage, firms transact on a product market and we allow for a variety of market structures. Our framework establishes the endogenous determination of equilibrium price, market structure, and levels of exchange in the permit market.
    Keywords: Pollution market, Market power, Strategic market game
    JEL: C72 D43 D51 L13 Q53
    Date: 2016–01–29
  13. By: Gérard Mondello (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article highlights the importance of the use of credible and non-credible threats. Its main lesson is that cooperation is even stronger when based on long-term relationships which makes failures implausible. It reasonably well describes the relationships that exist between the Russian Federation and China (players 1 and 3), player 2 for example being Europe. Obviously, one may object that the United States are missing from the picture. In fact, adding a fourth partner would not have changed the global framework of the game but would have add in complexity. All in all, international relationsships analysis can usefully be studied in terms of classical game theory. However, this approach needs adaptations of standard game theory. Indeed, t these games are sequential and they mainly accept pure strategies as solution of the game but not mixed strategies which are non sense in this context. However, mixed strategies can be conceived in the cases of armed conflict. To conclude, even if not developed, the spirit of GO game motivated our paper in which cooperation between two players does not exclude competition. Players 1 and 3 of our representation understood that they could not permanently exclude on each other from the international scene. Then, they preferred delineate areas that give them the highest possible benefits. In the simple model we gave, Player-2 bears the brunt of this agreement.
    Keywords: Game theory, coalitions, geostrategy, threat-game
    Date: 2015–05–06
  14. By: Hans Haller; Britta Hoyer
    Abstract: Social psychology studies the “common enemy effectâ€, the phenomenon that members of a group work together when they face an opponent, although they otherwise have little in common. An interesting scenario is the formation of an information network where group members individually sponsor costly links. Suppose that ceteris paribus, an outsider appears who aims to disrupt the information flow within the network by deleting some of the links. The question is how the group responds to this common enemy. We address this question for the homogeneous connections model of strategic network formation, with two-way flow of information and without information decay. For sufficiently low linkage costs, the external threat can lead to a more connected network, a positive common enemy effect. For very high but not prohibitively high linkage costs, the equilibrium network can be minimally connected and efficient in the absence of the external threat whereas it is always empty and inefficient in the presence of the external threat, a negative common enemy effect.
    Keywords: strategic network formation, strategic network disruption, common enemy effect.
    Date: 2015
  15. By: Damien Bo (King's College, London); Arnaud Dellis (University of Quebec in Montreal); Mandar Oak (School of Economics, University of Adelaide)
    Abstract: We survey the literature that compares the theoretical properties of different voting procedures using models of electoral competition with endogenous candidacy. In particular, we focus on the predictions made by these models regarding the number of candidates running for election and their polarization. We organize the different models into three families based on different assumptions regarding candidate motivation and the timing of candidate entry. We argue that endogenous candidacy models offer both theoretical and empirical advantages over the standard Hotelling-Downs model in the comparison of the properties of alternative voting procedures. On the theoretical front, these models can provide a more satisfactory microfoundation for the emergence and/or stability of a specific configuration of parties or candidates under different voting procedures. On the empirical front these models offer a better account of the stylized facts about elections, particularly when it comes to explaining the cases where Duverger's propositions apply and the cases where they do not. We also point to shortcomings of these models and propose some directions for future research.
    Keywords: Voting rules; Candidates; Polarization; Duverger's law; Duverger's hypothesis
    JEL: C72 D72 H11
    Date: 2016–02
  16. By: Daniela Di Cagno; Arianna Galliera; Werner Güth; Luca Panaccione
    Abstract: Similar to Fischbacher and Gachter (2010) we try to understand and explain the motivation of participants when contributing to a public good. In the Hybrid Public Good experiment each of two interacting contributors chooses an independent contribution level and three adjusted contribution levels when (s)he, as the only adjusting player, learns that the other’s independent contribution is smaller, equal or larger than the own one. We systematically vary the probability that one player can adjust, based on such qualitative information, but maintain that no adaptation at all and adaptation by only one occurs with positive probability. Adaptation is framed in two ways, once by additively changing the own independent contribution and once by stating new contribution levels. Surprisingly, there is a strong framing effect which increases with experience. Reacting to coinciding independent contributions implies impressive conformity in contributing. Reacting to higher, respectively lower independent contributions implies average upward, and, more strongly, downward adaptation.
    Keywords: Public goods, experiments, voluntary contribution mechanism
    JEL: C91 C72 H41
  17. By: Gustavo Bergantiños (Universidad de Vigo); Juan D. Moreno-Ternero (U. Pablo de Olavide y CORE, Université catholique de Louvain)
    Abstract: We present a new rule for the problem of sharing the revenue from museum passes. The rule allocates the revenue from each pass proportionally to the product of the admission fee and the number of total visits (with and without pass) of the museums. We provide a systematic study of the properties of the rule, in comparison with other rules in the literature.
    Keywords: axioms, resource allocation, museum passes, proportional, marginality.
    JEL: D63 C71
    Date: 2016–02
  18. By: Abbring, Jaap H; Campbell, Jeffrey R; Tilly, Jan; Yang, Nan
    Abstract: This paper develops an econometric model of oligopoly dynamics that can be estimated very quickly from market-level observations of demand shifters and the number of producers. We show that the model has an essentially unique symmetric Markov-perfect equilibrium and provide an algorithm that calculates it quickly. We embed this algorithm in a nested fixed point estimation procedure and apply the result to U.S. local cinema markets. Estimates from County Business Patterns data point to very tough competition for film exhibition rights. Sunk costs make the industry's transition following a permanent demand shock last 10 to 15 years.
    Keywords: counterfactual policy analysis; demand uncertainty; dynamic oligopoly; firm entry and exit; nested fixed point estimator; sunk costs; toughness of competition
    JEL: C25 C73 L13
    Date: 2016–01

This nep-gth issue is ©2016 by László Á. Kóczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.